Stop Hunting Bubble

When I first learned about order flow trading, there were pretty much only two inefficiencies talked about. It was all about stop hunting and option barriers. Those were pretty much the only inefficiencies talked about. News Trading was talked about a little bit, but most people don’t know how and don’t want to do the work to figure that out, so that was not talked about much.

What tends to happen is that a stop hunting and option barrier bubble forms in peoples minds. It formed in my beginning order flow mindset as well. You start to view the market through the order flow generators and scenarios of stop hunting and option barriers.

And you need to be careful about just staying in the stop hunting bubble. Stop hunting and option barriers are great. I use those techniques every chance I get. But the bigger and even more lucrative opportunities are with news, sentiment and global macro trading. Because once you learn those, then you can mix and match them to truly capture almost any type of market move that you want.

Thank god I got out of the tunnel vision and stop hunting bubble. Because it is a bubble. That is the only inefficiency that they realize and thus do not search for any more order flow inefficiencies.

The problem with stop hunting and option barriers is that they cannot explain the why of price movement every single day. Stop hunting and option barriers cannot explain the big moves in price. They cannot explain the large chunk of 500 pip or 1,000 pip movements.

And if they cannot do that, you are either forced to only trade the days when those inefficiencies are active, or attempt to trade them every day, which diminishes your edge because stop hunting and option barriers full influence is not present each and every day. Your edge is diminished because you are unaware of the other order flow generators, triggers, and scenarios that can move the market.

If they cannot explain price movement every day, then it can be to your advantage to figure out the other order flow generators and scenarios that can move the markets in addition to the stop hunting and option barriers. Things like news, sentiment, global macro, positioning, expectations, etc. As once you figure out those things then you can combine them with the stop hunting and option barrier inefficiencies to truly extract money from the markets in a more efficient way. You get far closer to the order flow super system.

I know because I tried to trade with knowledge of stops and option barriers in a vacuum with no other knowledge. It’s better than other forms of trading. But where your trading really takes off and the rise to the highest point on the trading profit ladder occurs is when you understand news and global macro analysis and incorporate that with stops and option barriers.

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6 Responses to Stop Hunting Bubble

JohnSeptember 16, 2011

Grkfx,
thank you for establishing the priority of News and Global Macro here. I particularly like your videos for being such clear models of how to think in these ways. I've begun your recco'd reading list - are their any particular books or other recorded media that also give, explicit opportunities to observe this kind of thinking?
John

Hey John,
I am constantly searching for more global macro books to add to my list, but they are hard to find. Most new books that come out are all filled with some sort of technical analysis instead of global macro. I actually thought I was lucky that I found the Inside the House of Money books.
As for more explicit opportunities, once you attain the order flow mindset, liquidity mindset, global macro mindset, then every time the market makes a huge move you will have trained your mind to to look for the global macro triggers. They happen every month, you just need to explain the "why" of price through global macro scenarios, triggers, mixed in with order flow.

Hi,
I am not much of a global macro and news guy. However - options are there on EUR/USD everyday. With a little experience you can know where they are without any other information sources i.e. only from the charts. Once you know where they exist, its just a matter of playing out a few scenarios
So my view is that you can make quite a bit via options trading intraday and I have been doing so too.
Grfx - it would be nice if you could explain more about the global macro stuff. Thing is I have noticed that what ever macro announcements happen, the ultimate direction is decided by how the big guys are positioned..... Hence I have more faith in intra day trading

Hey S128,
Yes I explained in one of my other articles about how I started out with the intraday inefficiencies and slowly moved to the global macro. People have faith in the intra day trading because the inefficiencies happen faster so they get more experience.
The global macro trades don't happen as often as intraday option trades.
People just have an easier time learning and believing something if they see it happening ten or twenty times a month as opposed to 1-5 times per month. That is how it has always been.
I will see what I can do explaining global macro better in future blog posts.

I think that it is enough to catch a 500 pip move once by using news and global macro. Once you manage to do that, you simply don't want to go back to stop hunting, but you want to know more about news trading and global macro. At least this happened to me. I'm still in the early stage of the learning process, but I'm eager to learn more.
And nothing of this wouldn't happen if it wouldn't be for you and this site, Grkfx! So thank you for this from the bottom of my heart.
ppfx